Download Safe: Cap and Discount

[COMPANY NAME]
SAFE
(Simple Agreement for Future Equity)
THIS CERTIFIES THAT in exchange for the payment by [Investor Name] (the “Investor”) of $[________]
(the “Purchase Amount”) on or about [Date of Safe], [Company Name and ACN] (the “Company”), hereby
issues to the Investor the right to certain shares of the Company’s Shares, subject to the terms set forth
below.
The “Valuation Cap” is $[___________].
The “Discount Rate” is [100 minus the discount]%.
See Section 2 for certain additional defined terms.
1.
Events
(a)
Equity Financing. If there is an Equity Financing before the expiration or termination of this
instrument, the Company will automatically issue to the Investor a number of shares of Safe
Preference Shares equal to the Purchase Amount divided by the Conversion Price.
In connection with the issuance of Safe Preference Shares by the Company to the Investor pursuant
to this Section 1(a):
(i)
The Investor will execute and deliver to the Company all transaction documents related to
the Equity Financing; provided, that such documents are the same documents to be entered
into with the purchasers of Standard Preference Shares, with appropriate variations for the
Safe Preference Shares if applicable, and provided further, that such documents do not
require the Investor to
(1)
make any representations or warranties; or
(2)
provide any indemnities;
with respect to any drag-along terms, or transactions applicable to the Investor; and
(ii)
The Investor and the Company will execute a Pro Rata Rights Agreement, unless the
Investor is already included in such rights in the transaction documents related to the Equity
Financing.
(b)
Liquidity Event. If there is a Liquidity Event before the expiration or termination of this instrument,
the Investor will, at its option, either
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(i)
receive a cash payment equal to the Purchase Amount (subject to the following paragraph)
or
(ii)
automatically receive from the Company a number of shares of Ordinary Shares equal to
the Purchase Amount divided by the Liquidity Price, if the Investor fails to select the cash
option.
In connection with Section 1(b)(i), the Purchase Amount will be due and payable by the Company
to the Investor immediately prior to, or concurrent with, the consummation of the Liquidity Event.
If there are not enough funds to pay the Investor and holders of other Safes (collectively, the “CashOut Investors”) in full, then all of the Company’s available funds will be distributed with equal
priority and pro rata among the Cash-Out Investors in proportion to their Purchase Amounts, and
the Cash-Out Investors will automatically receive the number of shares of Ordinary Shares equal to
the remaining unpaid Purchase Amount divided by the Liquidity Price.
(c)
Dissolution Event. If there is a Dissolution Event before this instrument expires or terminates, the
Company will pay an amount equal to the Purchase Amount, due and payable to the Investor
immediately prior to, or concurrent with, the consummation of the Dissolution Event. The Purchase
Amount will be paid prior and in preference to any Distribution of any of the assets of the Company
to holders of outstanding Shares by reason of their ownership thereof. If immediately prior to the
consummation of the Dissolution Event, the assets of the Company legally available for distribution
to the Investor and all holders of all other Safes (the “Dissolving Investors”), as determined in good
faith by the Company’s board of directors, are insufficient to permit the payment to the Dissolving
Investors of their respective Purchase Amounts, then the entire assets of the Company legally
available for distribution will be distributed with equal priority and pro rata among the Dissolving
Investors in proportion to the Purchase Amounts they would otherwise be entitled to receive
pursuant to this Section 1(c).
(d)
Termination. This instrument will expire and terminate (without relieving the Company of any
obligations arising from a prior breach of or non-compliance with this instrument) upon either
(i)
the issuance of share to the Investor pursuant to Section 1(a) or Section 1(b)(ii); or
(ii)
the payment, or setting aside for payment, of amounts due the Investor pursuant to Section
1(b)(i) or Section 1(c).
2.
Definitions
(a)
“Change of Control” means
(i)
means a change of Control with respect to the Company;
(ii)
any reorganization, merger or consolidation of the Company, other than a transaction or
series of related transactions in which the holders of the voting securities of the Company
outstanding immediately prior to such transaction or series of related transactions retain,
immediately after such transaction or series of related transactions, at least a majority of the
total voting power represented by the outstanding voting securities of the Company or such
other surviving or resulting entity or
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(iii)
a sale, lease or other disposition of all or substantially all of the assets of the Company.
(b)
“Control” has the same meaning given in section 50AA of the Corporations Act 2001 (Cth).
(c)
“Company Capitalization” means the sum, as of immediately prior to the Equity Financing, of:
(i)
all shares of Shares (on an as-converted basis) issued and outstanding, assuming exercise or
conversion of all outstanding vested and unvested options, warrants and other convertible
securities, but excluding:
(ii)
(1)
this instrument;
(2)
all other Safes; and
(3)
convertible promissory notes; and
all shares of Ordinary Shares reserved and available for future grant under any equity
incentive or similar plan of the Company, and/or any equity incentive or similar plan to be
created or increased in connection with the Equity Financing.
(d)
“Conversion Price” means the either:
(i)
the Safe Price; or
(ii)
the Discount Price, whichever calculation results in a greater number of shares of Safe
Preference Shares.
(e)
“Discount Price” means the price per share of the Standard Preference Shares sold in the Equity
Financing multiplied by the Discount Rate.
(f)
“Distribution” means the transfer to holders of Shares by reason of their ownership thereof of cash
or other property without consideration whether by way of dividend or otherwise, other than
dividends on Ordinary Shares payable in Ordinary Shares, or the purchase or redemption of Shares
by the Company or its subsidiaries for cash or property other than:
(i)
repurchases of Ordinary Shares held by employees, officers, directors or consultants of the
Company or its subsidiaries pursuant to an agreement providing, as applicable, a right of
first refusal or a right to repurchase shares upon termination of such service provider’s
employment or services; or
(ii)
(ii) repurchases of Shares in connection with the settlement of disputes with any
shareholder.
(g)
“Dissolution Event” means
(i)
a voluntary termination of operations,
(ii)
a general assignment for the benefit of the Company’s creditors or
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(iii)
any other liquidation, dissolution or winding up of the Company (excluding a Liquidity
Event), whether voluntary or involuntary.
(h)
“Equity Financing” means a bona fide transaction or series of transactions with the principal purpose
of raising capital, pursuant to which the Company issues and sells Preference Shares at a fixed premoney valuation.
(i)
“Initial Public Offering” means an initial public offering of Shares or shares in a holding company of
the Company in conjunction with a listing or quotation of Shares or shares in a holding company of
the Company on a recognised share exchange.
(j)
“Liquidity Capitalization” means the number, as of immediately prior to the Liquidity Event, of
shares of Shares (on an as-converted basis) outstanding, assuming exercise or conversion of all
outstanding vested and unvested options, warrants and other convertible securities, but excluding:
(i)
shares of Ordinary Shares reserved and available for future grant under any equity incentive
or similar plan;
(ii)
this instrument;
(iii)
other Safes; and
(iv)
convertible promissory notes.
(k)
“Liquidity Event” means a Change of Control or an Initial Public Offering.
(l)
“Liquidity Price” means the price per share equal to the Valuation Cap divided by the Liquidity
Capitalization.
(m)
“Pro Rata Rights Agreement” means a written agreement between the Company and the Investor
(and holders of other Safes, as appropriate) giving the Investor a right to purchase its pro rata share
of private placements of securities by the Company occurring after the Equity Financing. Pro rata
for purposes of the Pro Rata Rights Agreement will be calculated based on the ratio of (1) the number
of shares of Shares owned by the Investor immediately prior to the issuance of the securities to (2)
the total number of shares of outstanding Shares on a fully diluted basis, calculated as of immediately
prior to the issuance of the securities.
(n)
“Safe” means an instrument containing a future right to shares of Shares, similar in form and content
to this instrument, purchased by investors for the purpose of funding the Company’s business
operations.
(o)
“Safe Preference Shares” means the shares of a series of Preference Shares issued to the Investor in
an Equity Financing, having the identical rights, privileges, preferences and restrictions as the shares
of Standard Preference Shares, other than with respect to:
(i)
the per share liquidation preference and the conversion price for purposes of price-based
anti-dilution protection, which will equal the Conversion Price; and
(ii)
the basis for any dividend rights, which will be based on the Conversion Price.
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(p)
“Safe Price” means the price per share equal to the Valuation Cap divided by the Company
Capitalization.
(q)
“Shares” means the shares of the Company, including, without limitation, the “Ordinary Shares” and
the “Preference Shares.”
(r)
“Standard Preference Shares” means the shares of a series of Preference Shares issued to the investors
investing new money in the Company in connection with the initial closing of the Equity Financing.
3.
Company Representations
(a)
The Company is a corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and has the power and authority to own, lease and operate its
properties and carry on its business as now conducted.
(b)
The execution, delivery and performance by the Company of this instrument is within the power of
the Company and, other than with respect to the actions to be taken when equity is to be issued to
the Investor, has been duly authorized by all necessary actions on the part of the Company. This
instrument constitutes a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors’ rights generally and general
principles of equity. To the knowledge of the Company, it is not in violation of
(i)
its Constitution,
(ii)
any material statute, rule or regulation applicable to the Company or
(iii)
any contract to which the Company is a party or by which it is bound, where, in each case,
such violation or default, individually, or together with all such violations or defaults, could
reasonably be expected to have a material adverse effect on the Company.
(c)
The performance and consummation of the transactions contemplated by this instrument do not and
will not:
(i)
violate any material judgment, statute, rule or regulation applicable to the Company;
(ii)
result in the acceleration of any material indenture or contract to which the Company is a
party or by which it is bound; or
(iii)
result in the creation or imposition of any lien upon any property, asset or revenue of the
Company or the suspension, forfeiture, or nonrenewal of any material permit, license or
authorization applicable to the Company, its business or operations.
(d)
No consents or approvals are required in connection with the performance of this instrument, other
than:
(i)
the Company’s corporate approvals;
(ii)
any qualifications or filings under applicable securities laws; and
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(iii)
necessary corporate approvals for the authorization of Shares issuable pursuant to Section
1.
(e)
To its knowledge, the Company owns or possesses (or can obtain on commercially reasonable terms)
sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, processes and other intellectual property rights necessary for its business as
now conducted and as currently proposed to be conducted, without any conflict with, or
infringement of the rights of, others.
4.
Investor Representations
(a)
The Investor has full legal capacity, power and authority to execute and deliver this instrument and
to perform its obligations hereunder. This instrument constitutes valid and binding obligation of the
Investor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to or affecting the enforcement of creditors’ rights
generally and general principles of equity.
(b)
The Investor is a sophisticated investor as such term is defined in s 708 of the Corporations Act 2001
(Cth). The Investor is purchasing this instrument and the securities to be acquired by the Investor
hereunder for its own account for investment, not as a nominee or agent, and not with a view to, or
for resale in connection with, the distribution thereof, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. The Investor has such
knowledge and experience in financial and business matters that the Investor is capable of evaluating
the merits and risks of such investment, is able to incur a complete loss of such investment without
impairing the Investor’s financial condition and is able to bear the economic risk of such investment
for an indefinite period of time.
5.
Miscellaneous
(a)
Any provision of this instrument may be amended, waived or modified only upon the written
consent of the Company and the Investor.
(b)
Any notice required or permitted by this instrument will be deemed sufficient when delivered
personally or by overnight courier or sent by email to the relevant address listed on the signature
page, or 48 hours after being deposited in the post as certified or registered mail with postage prepaid,
addressed to the party to be notified at such party’s address listed on the signature page, as
subsequently modified by written notice.
(c)
The Investor is not entitled, as a holder of this instrument, to vote or receive dividends or be deemed
the holder of Shares for any purpose, nor will anything contained herein be construed to confer on
the Investor, as such, any of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action or to receive notice of meetings, or to receive
subscription rights or otherwise until shares have been issued upon the terms described herein.
(d)
Neither this instrument nor the rights contained herein may be assigned, by operation of law or
otherwise, by either party without the prior written consent of the other; provided, however, that
this instrument and/or the rights contained herein may be assigned without the Company’s consent
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by the Investor to any other entity who directly or indirectly, controls, is controlled by or is under
common control with the Investor, including, without limitation, any general partner, managing
member, officer or director of the Investor, or any venture capital fund now or hereafter existing
which is controlled by one or more general partners or managing members of, or shares the same
management company with, the Investor; and provided, further, that the Company may assign this
instrument in whole, without the consent of the Investor, in connection with a reincorporation to
change the Company’s domicile.
(e)
In the event any one or more of the provisions of this instrument is for any reason held to be invalid,
illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more
of the provisions of this instrument operate or would prospectively operate to invalidate this
instrument, then and in any such event, such provision(s) only will be deemed null and void and
will not affect any other provision of this instrument and the remaining provisions of this instrument
will remain operative and in full force and effect and will not be affected, prejudiced, or disturbed
thereby.
(f)
All rights and obligations hereunder will be governed by the laws of the State of [Governing Law
Jurisdiction], without regard to the conflicts of law provisions of such jurisdiction.
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Executed as an Agreement
Executed in accordance with section 127 of
the Corporations Act 2001 by [Company
Name and ACN]:
Director Signature
Director/Secretary Signature
Print Name
Print Name
Address
Email
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USE THIS SIGNATURE PANEL IF THE INVESTOR IS A PERSON. DELETE OTHERWISE.
Executed as an Agreement
Signed Sealed and Delivered by the Investor in
the presence of:
Witness Signature
Investor Signature
Witness Name
Investor Name
Investor Address
Investor Email
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USE THIS SIGNATURE PANEL IF THE INVESTOR IS A COMPANY. DELETE OTHERWISE.
Executed as an Agreement
Executed in accordance with section 127 of
the Corporations Act 2001 by the Investor:
Director Signature
Director/Secretary Signature
Print Name
Print Name
Investor Address
Investor Email
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